Opening a savings account is an important step in your financial life. It gives you a secure place to store your money, builds up your credit history, and allows you to earn interest on the funds you’ve saved. Know the steps to open a savings account but first, know what type of account is best for you. Here’s how:
Know your account type
Next, you will have to determine the type of savings account that is best for your needs. There are several types of accounts available:
- Regular savings accounts – these are interest-bearing and pay higher interest rates than regular checking accounts.
- Money market accounts – money market accounts are also called “super savers” or “money market” accounts. These types of savings accounts offer higher interest than regular savings but come with restrictions on withdrawals and deposits.
- Certificates of deposit (CDs) – CDs are long-term investments in which your money can’t be withdrawn without a penalty until a specified term has passed (typically six months to five years).
Understand the fine print
A savings account is like a checking account, except that you can’t write checks from it. Banks use your money to make loans to other people and pay you interest on what they’ve borrowed from you. Savings accounts are also known as “conduit” or “pass-through” accounts because the bank acts as a conduit for your money, allowing you to save up for planned purchases in the future by earning interest on today’s balance.
Ask about fees
This is a big one, so don’t gloss over it! Before you do anything else, ask how much each account will cost you in terms of monthly service fees and other costs. Some banks charge a monthly minimum balance fee, while others charge per transaction or ATM withdrawal. If there’s no cap on the number of withdrawals, it could get expensive quickly if you use your debit card frequently (especially if you’re planning to travel outside the U.S.).
Consider interest rates
Interest rates vary between banks and types of accounts. Some banks offer better interest rates for longer-term accounts, as well as higher balance accounts. Interest rates are usually lower for shorter-term accounts but may also be higher if you have a high balance in your savings account. According to Lantern SoFi experts, “If you exceed the bank’s transaction, you will be charge a fee.”
Monitor savings regularly
Monitoring savings regularly will help you stay on top of your finances. You can do this online or by phone. There are also several ways to monitor your account:
- Set up alerts to notify you when certain conditions are met, such as when a large amount is transferred or withdrawn from the account.
- Set up automatic transfers between accounts when you need extra funds in one account and want to transfer the money into another (for example, if your paycheck is deposited into one account but bills come out of another).
Opening a savings account is a great way to build your financial future. Before you do so, there are several things you should consider and steps you can take to ensure that the process goes smoothly. Hopefully. this article has given you some insight into what it takes to open a savings account and helped answer any questions you might have had about this topic!